How Korean Courts Calculate Patent Damages (KPA Art. 128): Methods, Case Trends, and Winning Strategies

Winning liability is only half the battle. Under Article 128 of the Korean Patent Act (KPA), courts use several frameworks to calculate adequate monetary relief—lost profits, infringer’s profits (as a presumption), or a reasonable royalty—and may enhance damages up to 5× for willful infringement. Post-2019 and 2024 amendments have made damages more robust and strategically complex. This guide distills the law, recurring evidentiary issues, recent judicial tendencies, and practical playbooks for both patentees and accused infringers.

1) Lost Profits: Patentee’s Foregone Earnings (KPA Art. 128(2)–(3))

Core rule & formula

When you can show you would have made the infringer’s sales, Korean courts award lost profits:

Lost Profits = Min{ Q_infringing, (Q_capacity − Q_actual_patentee_sales) } × Patentee unit marginal profit × (1 − market offset rate)

• Q_infringing: Units the infringer sold (plaintiff bears proof; use production/sales records via document production orders under KPA Art. 132).
• Patentee marginal profit: Courts focus on contribution margin (revenue minus variable costs directly tied to making/selling the product). Fixed costs (depreciation, overhead, fixed payroll) are generally not deducted.
• Capacity cap: Damages cannot exceed your available manufacturing capacity (plant/equipment, workforce, past utilization, feasible outsourcing, credible expansion plans).
• Market offsets (Art. 128(3)): Courts reduce damages for non-infringement factors—e.g., competing products, weak demand, brand gaps, or pricing power. Analytical tools include share/elasticity analyses and cross-price substitution evidence.

Common pitfalls (and how we handle them)

• Variable vs. fixed cost disputes (quasi-variable items, shared lines). Solution: rigorous cost accounting and expert declaration.
• Capacity fights (theoretical max vs. practicable run rates; outsourcing). Solution: contemporaneous ops data, supplier MOUs, lead-time proof.
• Causation & offsets (availability of non-infringing substitutes). Solution: structured Panduit-style showing—(1) demand, (2) lack of acceptable non-infringing substitutes, (3) capacity/marketing ability, (4) profit.

2) Infringer’s Profits: Presumed Damages (KPA Art. 128(4))

What it does

Article 128(4) lets the court presume the patentee’s damages equal the profits the infringer earned from the infringement—easing the patentee’s proof burden.

Infringer’s Profits = Infringer’s revenue from infringing product − directly related costs (primarily variable)

Rebuttal via apportionment

The infringer can rebut by proving that part of its profits stems from non-patented contributions (brand, design, independent tech, marketing). Expect apportionment battles requiring concrete proof: R&D records, campaign ROIs, IP portfolios, and feature-level attribution.

When to use

• Patentee has limited capacity or thin margins, while the infringer posts high margins.
• Discovery leverage: use Art. 132 document production orders; failure to comply can support the patentee’s position.

3) Reasonable Royalty: The Floor (KPA Art. 128(5)–(6))

Purpose

If lost profits or infringer’s profits are hard to prove or too small, courts award at least a reasonable royalty—the amount the parties would have agreed in a hypothetical negotiation at the time infringement began. The 2019 amendment shifted from “ordinary” to “reasonable” to enable case-specific valuation.

Formula

Reasonable Royalty = (Infringing sales or units) × (Royalty rate or per-unit fee)

Key valuation inputs (Georgia-Pacific–style factors applied pragmatically)

• Established royalties for the patent/technology (if any)
• Industry benchmarks and comparable license terms
• Technical importance & commercial contribution of the patented feature
• Availability and cost of non-infringing alternatives
• Patent term and claim strength
• Exclusivity, bundled/convoyed sales, and business context at the negotiation date

Art. 128(6) “top-up”: If a patentee later proves actual loss exceeds the reasonable royalty, the difference can be added—making the royalty a floor, not a ceiling.

4) Combining Methods & Other Damages (KPA Art. 128(7))

Korean courts may blend methods to ensure full compensation. A well-accepted approach:

• Within patentee capacity: award lost profits.
• Beyond capacity (excess infringing sales): award a reasonable royalty.

Additional theories sometimes pursued:

• Price-erosion damages (if the patentee cut price due to infringing undercutting). These are treated as special damages requiring foreseeability evidence and robust econometrics.

The court retains equitable discretion to adjust the final amount given the whole record.

5) Punitive (Enhanced) Damages for Willful Infringement: Up to 5× (KPA Art. 128(8)–(9))

Headline

For willful infringement, courts may enhance the base damages (as computed under (2)–(7)) by up to five times (post-2024 amendment, effective August 2024).

Willfulness indicators

• Knowledge of the patent and continued infringement
• Ignoring cease-and-desist letters, or inadequate FTO diligence
• Internal communications evidencing risk awareness
• (For defense) Reasonable non-infringement or invalidity positions, reliance on competent counsel, prompt remedial action

Eight statutory factors guiding the multiplier

1. Infringer’s superior bargaining position
2. Degree of intent or awareness of harm
3. Magnitude of harm
4. Infringer’s economic gains
5. Duration and frequency of infringement
6. Criminal penalties, if any
7. Infringer’s financial condition
8. Post-infringement conduct (remediation, settlement efforts)

Practical effect: The risk profile of Korean patent suits has materially risen, strengthening the incentives for early FTO work, design-around, or early resolution where exposure is significant.

Strategy Playbooks

For patentees (plaintiffs)

• Choose your primary theory early. If you have capacity and strong margins, build a lost-profits model; otherwise prepare infringer’s profits and royalty backstops.
• Prove capacity with plant data, supplier capacity, and expansion feasibility.
• Econometrics for causation: demand, substitution, and price effects; align with Panduit logic.
• Discovery leverage: press Art. 132 production; highlight non-compliance risks.
• Enhancement narrative: document willfulness and map facts to all eight multiplier factors.

For accused infringers (defendants)

• Apportionment first. Segment profits to the patented feature with credible attribution models.
• Alternatives & offsets. Develop evidence of non-infringing substitutes, demand drivers, and market shares.
• Willfulness defenses. Preserve quality opinions of counsel, document FTO efforts, and update designs promptly upon notice.
• Royalty sanity checks. Use industry benchmarks and contribution analysis to push rates down.

Worked Formulas at a Glance

• Lost Profits
  Damages = Min{ Q_infringing, (Q_capacity − Q_actual) } × Marginal Profit × (1 − Market Offset)
• Infringer’s Profits (Presumption)
  Damages = Infringing Revenue − Directly Related Costs (variable-focused), subject to apportionment for non-patented value.
• Reasonable Royalty (Floor)
  Damages = Infringing Sales × Royalty Rate (or) Units × Per-Unit Fee
  (Top-up to actual loss permitted under Art. 128(6)).
• Punitive/Enhanced
  Final Award ≤ Base Damages × up to 5

Quick FAQs

Q1. Can Korean courts combine lost profits and royalties?
Yes. A common pattern is lost profits up to the patentee’s capacity and reasonable royalty for excess sales.

Q2. Do Korean courts really focus on marginal (not net) profit?
Yes. They typically deduct variable costs but not fixed overhead when computing the patentee’s per-unit profit.

Q3. Are punitive damages automatic once willfulness is found?
No. Courts weigh eight statutory factors and exercise discretion up to 5×.

Q4. What if I have no established royalty data?
Courts will still set a reasonable royalty using a hypothetical negotiation analysis and industry/comparable data.

Q5. What evidence moves the needle most?
For plaintiffs: capacity proof, demand/substitution evidence, and clean cost accounting. For defendants: apportionment, alternative technologies, and documented FTO.

Why Pine IP Firm

We try and win the right number, not just the verdict. Our team blends trial strategy, economic modeling, and deep cross-border licensing experience to maximize (or mitigate) exposure under KPA Article 128, including 5× enhancement issues. Whether you need a lost-profits build, apportionment model, or royalty valuation, we field the right experts and data—fast.

Need a damages model or second opinion?
Share your product mix, cost breakdowns, and any license comps. We’ll propose the strongest path under Article 128, tailored to your facts.

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